Tips for Creating an Estate Plan that Benefits a Child with Special Needs

Establishing an estate plan that provides for your family after you are gone is a gift to the ones you love. If a special needs child is among your loved ones, there are specific steps you can take to ensure their additional financial and care needs are addressed.

The Brady Cobin Law Group, PLLC, has more than 35 years of experience helping families plan for the future. Our compassionate special needs planning lawyers can help you structure asset transfers and trusts so they preserve the government benefits your special needs child receives. Our strategies also consider the needs of your other children, including those who may take over caregiving responsibility or guardianship for a disabled sibling. 

Whether you are starting the process or updating an existing estate plan, our knowledgeable attorneys are here to help you. Contact us online today or at (919) 782-3500 in Raleigh, NC, to schedule a consultation about estate planning for a family with a special needs child.

Preserving Benefits Eligibility for a Special Needs Child

The primary function of wills and similar estate planning instruments is to direct the transfer of assets from one generation to the next. However, if the beneficiaries of your estate include a special needs child or adult, it is important to keep in mind the eligibility restrictions of certain federal benefits for the disabled.

The Brady Cobin Law Group can help you make plans that assist your child while ensuring their government benefits remain secure. Among those to consider are:

• Medicaid
• Supplemental Security Income (SSI)
• Supplemental Nutrition Assistance Program (SNAP)

Each of these programs requires beneficiaries to have limited assets and a low income to qualify. It’s important to consider how eligibility for each program would be affected by any asset transfers to your child. Our attorneys can review your options and which best suits your family’s specific situation.

For a disabled child or young adult who has a small income, such as from a legal settlement or Social Security, we often recommend establishing an ABLE account to preserve their benefits eligibility. 

An Achieving a Better Life Experience account allows individuals who became disabled before they turned 26 to set aside up to $15,000 a year in interest-earning savings accounts without affecting their eligibility for federal benefits. Earnings on investments are tax-deferred and tax-free if used for qualified disability expenses. This includes a wide variety of uses, such as housing, transportation, education, and personal support services, incurred as a result of living with a disability.

Money that funds an ABLE account may be the disabled individual’s income or come from others. An ABLE account may hold up to $100,000 before the account owner is in danger of losing SSI eligibility. An ABLE account does not affect Medicaid eligibility, regardless of the account balance. However, whether an ABLE account is appropriate for your special needs child may also depend on any state-based benefits the child receives.

Three Types of Trusts for a Special Needs Child

The easiest way to set aside money for a special needs child without jeopardizing eligibility for benefits programs is through a trust. Money in a special needs trust belongs to the trust, not the individual. A trustee is appointed to administer the trust’s assets.

There are three primary types of special needs trusts:

• First-party trust. A first-party trust is for assets that would otherwise go directly to the special needs child or adult. The trust administers the money on behalf of the beneficiary. A first-party trust is useful if the beneficiary is to receive significant assets because it doesn’t restrict how the money may be used. However, upon the death of the beneficiary, any money left in the trust is first used to repay the state for medical assistance paid for by a state Medicaid plan. 
• Third-party special needs trust. This type of trust is typically set up by family members for the benefit of the special needs child or adult. It can hold any type of asset not belonging to the beneficiary, such as proceeds from a parent’s life insurance policy, an investment portfolio, or income-producing property. The funds can be used for almost anything the beneficiary needs. At the death of the disabled beneficiary, assets of the trust transfer to designated recipients and there is no payback provision. 
• Pooled special needs trust. A pooled trust combines the resources of multiple beneficiaries in a trust administered by a nonprofit organization. Each beneficiary has their own sub-account and usually receives a proportionate share of the entire fund’s earnings. The resources used to fund a sub-account for the disabled beneficiary must have always been owned by someone else. When a beneficiary dies, their assets revert to the nonprofit. Special needs individuals who will no longer have living family members can be assured that inheritance put into a pooled trust account for them will be professionally administered.

Additional Provisions for a Special Needs Child

Along with a will and trust establishing how assets from your estate will benefit your special needs child, you may establish a financial power of attorney that allows an agent you name to use your assets to assist your special needs child if you become incapacitated. A financial power of attorney can be drafted to empower the agent to establish and fund a trust for your child.

It is also beneficial to draft a letter of intent to accompany estate planning documents. This is a plain-language explanation of your wishes for the care of your child that also advises a new non-family caregiver or trustee about the day-to-day activities, unique likes, dislikes, needs, preferences, and other information they should know about your special child.

Get Help From a Special Needs Family Planning Attorney

A child who is a special part of your family requires special thought and planning for when you cannot be there for them. The dedicated Raleigh special needs planning attorneys of the Brady Cobin Law Group have more than 35 years of experience helping North Carolina families like yours prepare for their future. We can help you understand how government programs, special needs trusts, your will, insurance, and other estate planning vehicles can be set up to ensure your loved one’s future needs will be met.

If you care for someone with special needs, our experienced attorneys have the knowledge and resources to help you make your loved one’s future secure. Contact us online today or at (919) 782-3500 to set up a conversation about your estate plan.